Is This Dow Component Really Junk?


Late last week, Moody's downgraded the corporate debt of Alcoa from Baa3 to Ba1, citing weakness in the industry and commenting that it is unlikely that the company will return to investment grade status in the near term. While the Aluminum Corporation of China and BHP Billiton face similar pressures, both seem to be in better shape. Ultimately, if the bellwether is relegated to junk status, its future as a solid investment looks uncertain.

In the video below, contributor Doug Ehrman discusses some of the developments leading to the move by the rating agency and asks how you may wish to think about Alcoa.

Materials industries are traditionally known for their high barriers to entry, and the aluminum industry is no exception. Controlling about 15% of global production in this highly consolidated industry, Alcoa is in prime position to take advantage of growth that some expect will lead to total industry revenue approaching $160 billion by 2017. Based on this prospect and several other company-specific factors, Alcoa is certainly worth a closer look. For a Foolish investment perspective on this global giant simply click here now to get started.

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Fool contributor Doug Ehrman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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